Home / News / India /  Airlines face more turbulence as fares plunge in peak month

Airfares on India’s most popular routes have nosedived over the past month when demand is usually the strongest during a year in a worrying sign that one of the roughest stretches for the domestic aviation industry may not witness a quick turnaround, industry executives said on Thursday.

Average ticket prices between 25 October- 25 November for bookings made within a two-week window on several routes are 25% to 35% lower compared to the year-ago period, according to data from online travel company Cleartrip. Traditionally, bookings made in a two-week span prior to a flight command the highest rates.

After suffering heavy losses in the September quarter, airlines were pinning their hopes on the busy October-December quarter to turn back into profit. But industry officials now said that their fortunes are unlikely to change soon.

“The month of October has been a disaster as far as demand is concerned, while November has been marginally better," said a New Delhi-based senior executive of a budget airline. “The immediate future in terms of demand looks bleak."

Two of India’s largest airlines, IndiGo and SpiceJet have reported huge losses in the September quarter. While SpiceJet’s losses rose by a fifth year-on-year to 461.22 crore in the quarter, IndiGo, run by InterGlobe Aviation Ltd, plunged to a record quarterly loss of 1,062 crore in the same period.

One-way average airfares between New Delhi and Mumbai, one of the country’s busiest sectors, have fallen by about 30% annually to 6,063 in the 25 October-25 November period, while one-way average airfares between New Delhi-Chennai and Hyderabad-New Delhi have fallen 35% and 38%, respectively, to 5,287 and 4,282.

During the same period, one-way average airfare between Mumbai and Kolkata has fallen 33% to 5,650, while fares between Bengaluru and Mumbai have dropped 29% to 4,250. Airfares to prominent holiday destinations like Leh and Goa also fell 27% and 6% during the above mentioned period.

In contrast, fares in July rose year-on-year, following the vacuum in passenger capacity after the collapse of Jet Airways (India) Ltd in April. However, in their eagerness to fill in the lost capacity, airlines have ended up creating an overcapacity, compounded further by slack demand amid an economic downturn.

The poor showing in terms of ticket prices in October was the biggest surprise as there were two major festivals during October, Diwali and Dussehra, said another airline executive, who did not want to be identified.

“We are keeping our fingers crossed that things should improve in December."

IndiGo, which controls about 47% of the domestic aviation market, expects airline ticket prices to stay weak during the coming days. The airline’s chief executive told analysts during the post-results call in October that airlines rolling out sales during festive season showed the weakness in the market.

Another senior airline executive said that the combination of slowing economy and the recovery of Jet Airways’ capacity that was wiped off from the market after the airline’s grounding, by other airlines, have led to lower fares even during traditionally strong months like October and November.

“The weak economic situation is forcing airlines to still discount ticket prices to fill planes," another senior airline executive, who also requested anonymity said adding that the usual practice of keeping last-minute ticket prices high, have disappeared currently.

“Airlines are being held captive to the actions of airlines that resort to lowering fares, whoever it maybe on a given day, as others have no option but to follow," the executive said.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
My ReadsRedeem a Gift CardLogout